The 36 Km(2) Timahdit oil shale block onshore Morocco moved a
step closer to development with the testing of the Enefit oil shale
process on 10 tonnes of oil shale samples from the block, in what
is effectively a small-scale version of the plant operational in
Estonia. Positive results were obtained, showing that the shale is
suitable for the Enefit process, has a high yield of shale oil, and
can be run effectively at a relatively low temperature (thus
reducing power requirements). A Memorandum of Understanding was
signed in 2013 with Chevron Lummus Global LLC to cooperate in oil
shale upgrading technology to produce high quality synthetic crude
oil from the shale oil, and results from the Enefit trial are being
provided to them.
An update to the existing pre-feasibility study for developing
the asset is expected to be carried out by a major engineering
company in due course.
France
Shale gas licences
In France, San Leon continues to hold over 2.4 million acres
(c9,000 Km(2) ) of licences under application. These are pending
due to the current moratorium in France. In the event of France
lifting the moratorium, San Leon would have first mover advantage.
Our position is retained at a very low cost.
Spain
Shale gas
In Spain, we hold more than 1.5 million acres which contain
significant gas potential. As with France, this position is held at
a low cost to the Company.
EXPLORATION ASSETS
Albania offshore
The Company's licence extension on its offshore Albania Durresi
block continues to July 2015. Despite plenty of interest, securing
a farm-in partner for a high cost offshore oil well has proved
difficult in the oil price climate of the past nine months as some
companies' budgets have become constrained. San Leon will instead
now drill an exploration well targeting an offshore Burdigalian
carbonate from an onshore location. This is a substantial prospect,
with a best estimate of around 11 mmbbl oil and some associated
gas, and from a wellsite location that is in close proximity to an
oil refinery and gas infrastructure.
Spain
Conventional
San Leon holds over 1.5 million net acres (c6000 Km(2) ) in
Spain, a country currently under-explored, with fewer than 500
exploration wells drilled.
Conventional potential exists here, in addition to the shale
prospectivity already mentioned under the "Long-Term Projects"
section.
Morocco
Morocco offshore (Sidi Moussa, Foum Draa)
The Genel-operated well on Sidi Moussa (San Leon net 10.0%
interest) targeting the Noor oil prospect was drilled in the second
half of 2014. High quality oil (26 API) was recovered during
drilling and testing operations, but no sustainable hydrocarbon
flow was possible. The extensive dataset gathered is being analysed
to determine next steps on the licence. Cost exposure to San Leon
was reduced by a significant carry.
The Foum Draa block, in which San Leon holds a 14.33% equity
interest, continues to be evaluated by Operator, Cairn Energy,
following the drilling of a well in late 2013.
Morocco onshore (Zag, Tarfaya)
A commitment well targeting Tertiary channel sands will be
drilled in 2015 in the onshore Tarfaya licence. This is updip of
gas found in an old well, and within easy pipeline distance of a
phosphate production plant for marketing gas. Several other channel
sands would be follow-on prospects in the event of success, and
deeper stacked horizons also exist. The extensive Zag licence
continues to be evaluated and may be the subject of further
geophysical surveying in the medium term.
Poland
During the last year a three-well shallow drilling programme was
planned in Poland, targeting gas in the Karpaty area (in
conjunction with 40% partner PGNiG) and oil in the Permian Basin
(as the final stage of a farm-in agreement with Celtique
Energy).
The Kety and Gieratowice wells in the Karpaty area were both
drilled and well tested, but in each case the gas rate tested was
sub-commercial. The wells have been plugged and abandoned. Data
acquired during the drilling will be used to re-evaluate the blocks
and develop a forward plan.
The Niwiska well in the Permian Basin has been deferred while
the oil price is low, as it could no longer be justified on a
risk-reward basis.
Romania
In the Romanian Carpathians we have over 350,000 gross acres
(c1400 Km(2) ). In addition to the Voitinel gas discovery well, the
Company has several other shallow and deep targets in a region with
existing gas production.
APPRAISAL AND READY TO DEVELOP
Poland
Baltic Basin
LEWINO-1G2 FRAC SUCCESS
In January 2014, we announced highly successful flow test
results on our hydraulic fracture of the Lewino-1G2 well in Gdansk
W concession in the Baltic Basin, Poland. A horizontal
multi-fracced well is planned and has been engineered. The Company
is confident that this horizontal well, following what the Board
believes is the most successful single frac in a vertical well in
Europe, has a good chance of proving the commerciality of this huge
resource as the existing positive frac results are scaled up to the
individual well configuration which would be used for a
development. San Leon has 220,000 net acres in the Gdansk W
concession alone, and around 1.2 million net acres across the
Baltic Basin. We are currently looking for a partner to continue
appraisal on this promising asset.
BRANIEWO S CONCESSION
Both shales (Silurian and Ordovician) and tight Cambrian
sandstone are oil targets in this concession. Further well
activity, such as a multi-fractured horizontal well in the tight
sandstone, has been put on hold until the oil price improves the
economics. Oil is already produced commercially from the sandstone
in the region.
NEAR-TERM INCOME
Ireland
Net Profit Interest
San Leon's 4.5% Net Profit Interest (NPI) on the Barryroe oil
field provides access to future revenue streams with no additional
capital required. A number of approaches have been received to
execute a transaction on the NPI and provide monetisation, but the
Company believes maximum shareholder value will be realised by
retaining it and its cash flows. Internal economic modelling, based
upon the Barryroe 2013 CPR summary and reasonable pricing
assumptions, indicates cash flow of more than $700 million net to
San Leon through field life.
Poland
Mature assets in the Carboniferous and Permian Basin
In July 2014, Palomar Natural Resources farmed into our assets
in Poland's Carboniferous and Permian Basins. The Rawicz and
Siekierki fields were identified for early production and cash
flow. Palomar paid a total of $20 million up-front for a 65% equity
stake and will execute work programmes as Operator.
On Rawicz, Palomar agreed to drill and test two wells at no
up-front cost to San Leon, with the Company only paying back its
35% share of drilling costs through production. The first of those
wells, Rawicz-12, was drilled in late 2014 and tested in early 2015
after the end of the reporting period. It was a great success, with
stable flow reaching 4.5 mmscf/d, and allowed a number of wells
drilled on the structure in the 1970s to be re-evaluated. In May
2015 a Competent Persons Report (CPR) was completed for Palomar by
Ryder Scott Company, yielding just over 50 Bcf of Probable reserves
for the full field. When an offtake agreement is signed, Palomar
and San Leon expect some reserves to be moved to Proved. Production
is targeted for Q1 2016.
On Siekierki, Palomar has undertaken to carry San Leon for the
workover of three existing wells, with the aim of tying in gas
production to the nearby distribution network.
The following financial information on San Leon Energy Plc
represents the Group's audited final results for the year ended 31
December 2014.
Consolidated income statement for the year ended 31 December
2014
31/12/14 31/12/13
EUR EUR
Continuing operations
Revenue 2,942 3,013
Cost of sales (543) (453)
------------- -------------
Gross profit 2,399 2,560
Other income - 4,229,277
Loss on disposal of subsidiaries (6,429,007) -
Administrative expenses (16,877,640) (10,899,228)
Impairment of exploration and
evaluation assets (9,149,836) (7,036,679)
Impairment of equity accounted
investments (3,345,664) (7,036,679)
Loss from operating activities (35,799,748) (13,704,070)
Finance expense (1,796,659) (1,587,240)
Finance income 231,352 1,751,393
Share of loss of equity-accounted
investments (54,002) (141,745)
Loss before income tax (37,419,057) (13,681,662)
Income tax expense (875,557) (19,778)
------------- -------------
Loss for the year after tax
from continuing operations (38,294,614) (13,701,440)
------------- -------------
Discontinued operations
Profit / (loss) from discontinued
operations (net of income tax) 30,258 (3,350,138)
------------- -------------
Loss for the year attributable
to equity holders of the Group (38,264,356) (17,051,578)
------------- -------------
Loss per share (cent) - continuing
operations
Basic and diluted loss per (1.52) (0.70)
ordinary share cent cent
------- -------
(Loss) / earnings per share
(cent) - discontinued operations
Basic and diluted earnings 0.01 (0.17)
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